Iceland’s Arctic Policies and Shifting Geopolitics

The role of the Arctic in Iceland’s foreign and security policies has been heavily influenced by external geopolitical factors. After World War II, Iceland was associated with Arctic militarization as part of its Cold War integration into NATO and the global U.S. base network. In the closing years of the East-West conflict, it, symbolically, became part of efforts to break out of a Soviet-American stalemate through its hosting of the Reykjavík Summit, which was followed by Soviet leader Mikhail Gorbachev’s heralding of a new era of intergovernmental cooperation in the Arctic. In the post-Cold War period, Iceland cemented its status as an Arctic state by becoming a member of several Northern subregional organizations—designed to integrate Russia into Western institutional structures—by assuming the rotating chair of the Arctic Council (AC) and by taking part in Arctic science cooperation. Yet, despite these various links to the Arctic, Iceland did not prioritize the area until two seminal events prompted it to do so: the U.S. military withdrawal from Iceland in 2006, relegating to history one of the Cold War’s main theaters in the North Atlantic, and the collapse of the Icelandic banking system during the height of the global financial crisis in 2008.

Historically, Iceland’s interests in the Arctic have been overshadowed by those of the North Atlantic—the main source of its abundant marine resources. A national identity projection, espoused by political and cultural elites, mixed nationalist and racial ideas with a portrayal of Iceland as a “developed” European country. A “southern” look toward the European continent always took precedence over territorial aspirations in the Arctic. In this regard, there was no gap between elite and popular perceptions. It had taken Icelanders centuries to escape external stigmas of being primitive and poor, belonging to the northern edges of the inhabitable; it was not until the middle of the nineteenth century and the early twentieth century that a more positive image emerged of an “educated Iceland” and the notion of the “Hellas of the North,” with references to the medieval saga literature. That also meant that Icelanders did not, in any way, want to be associated with Indigeneity or with the Inuit of Greenland; on the contrary, if they showed interest in the North, it was more about colonial mimicry. Thus, one academic, with some political support, argued in the first half of the twentieth century that Iceland should not recognize Denmark’s colonial control over Greenland and make, instead, a territorial claim to it—a proposition that was based on spurious historical grounds. What gave such a view, temporarily, more weight was Norway’s legal challenge to Denmarkʼs sovereign rights over Eastern Greenland, which the Permanent Court of International Justice (PCIJ) eventually rejected in 1933. The Greenland case, to be sure, was never pursued seriously by Icelandic governments in the 1930s and 1940s. Nonetheless, it reflected a persistent chauvinistic streak within Icelandic nationalism.

The October 2008 banking collapse in Iceland—at the beginning of the global financial crisis—had profound effects on its relations with the outside world. Under intense domestic political pressure, the coalition government of the Independence Party and the Social Democratic Alliance quickly began to prioritize economic and societal security at the expense of traditional military security. Initially, there was limited understanding for Iceland’s economic plight among its U.S., European, and Nordic allies who—with more than a hint of epicaricacy—saw the crash largely as a self-made disaster. They pointed out that through toothless financial supervision, Icelandic political elites had refused to listen to repeated foreign warnings and continued to promote an unsustainable banking expansion abroad. When Iceland’s main Western partners turned down its requests for emergency aid, the Icelandic government felt compelled to turn, formally, to Russia, asking it for a $5.4 billion loan. The conservative Prime Minister Geir Haarde put it bluntly: “We have not received the kind of support that we were requesting from our friends,” and in such a situation, “one has to look for new friends.” This abrupt call for new loyalties was not only fueled by political despondency; it was also influenced by hedging considerations aimed at opening up alternative non-Western venues in Iceland’s foreign policy to respond to a state of exception without abandoning its basic Western orientation. It was, however, difficult to accomplish such a goal in the absence of deeper political traditions and institutional ties.

Some scholars have defined contemporary Arctic geopolitics as an uneasy interaction between liberal institutionalism, emphasizing interstate cooperation and its ability to mitigate conflict, on the one hand, and neo-realism, with its preoccupation with the “anarchic” international system, power politics, and national security interests, on the other. Thus, the reopening of the Arctic from the military confines of the Cold War was interpreted during the last decade of the twentieth century as an opportunity to establish a new cooperative political order. In the twenty-first century, however, the Arctic was sometimes defined in terms of a resurgent neo-realism as states allegedly scrambled to reterritorialize a space to pursue national goals as part of resource competition. A case can be made for such a dualist reading, but with qualifications. The immediate post-Cold War period witnessed, as we have seen, a period of collaboration in the Arctic. Subsequently, the spate of media accounts on the “Scramble for the Arctic” and the potential for Great Power rivalry temporarily disturbed this narrative. It was, however, quickly dwarfed by a revival of government and scholarly discourses on neo-liberal cooperation schemes underscored by the commitment of the Arctic Five to the Law of the Sea and a peaceful settlement of potential territorial disputes.

Since the end of the Cold War, Iceland’s approach toward the Arctic has been driven by two central concerns: that it be counted as a legitimate Arctic state and that its geostrategic location be used to promote political and economic aims. It partly explains the belabored status-seeking attempts to define Iceland’s Arcticness as being exceptional or privileged—whether to buttress the questionable claim that it is the only coutry situated as a whole within the Arctic region or to push, until recently, for external recognition of its status as an Arctic coastal state. As we have seen here, this national narrative was met with skepticism by some other Arctic states. To be sure, despite strong Soviet and, later, Russian reservations, Iceland was included in the Arctic institutional arrangements that were formed in the 1990s, notably, the Arctic Council, but also other regional organizations—where its stakeholding role or interests were minimal—such as the Barents Euro-Arctic Council, the Council of the Baltic Sea States, and the Northern Dimension. Yet the Arctic Five were initially not prepared to accept Iceland’s coastal state aspirations, even if they belatedly recognized its maritime interests in the Arctic by including it in the negotiations on the fishing moratorium in the Arctic Ocean.